Accelerated Investment Incentive
no fixed amount
Tax Credit
Description:
The Accelerated Investment Incentive provides businesses an enhanced first-year allowance for certain capital property that is subject to the Capital Cost Allowance (CCA) rules. Capital cost allowance (CCA) is the amount of amortization expense that the government will allow a company to deduct from its income for tax reporting purposes. The Accelerated Investment Incentive does not change the total amount that businesses can deduct over the life of a property. By claiming a larger CCA deduction in the first year, businesses will have smaller CCA deductions in future years.
Comments on Funding:
The incentive’s general rule will be made up of two elements: applying the prescribed CCA rate for a class to one-and-a-half times the net addition to the class for the year suspending the existing CCA half-year rule (and equivalent rules for Canadian vessels and class 13 property).
The incentive’s general rule will not apply to classes 43.1, 43.2, and 53, as they will benefit from the full expensing measures. As a result, eligible property currently subject to the half-year rule will, in essence, qualify for an enhanced CCA equal to three times the normal first-year deduction. Eligible property not subject to the half-year rule (e.g., patent, franchise or limited-period licence) will qualify for one-and-a-half times the normal first-year deduction.
Eligible properties on how the incentive applies/is calculated: 1. For eligible property that would normally be subject to the half-year rule (or an equivalent rule) and that becomes available for use during the 2024-2027 phase-out period, the incentive will effectively suspend the half-year rule (and equivalent rules). In essence, applicants will be able to calculate CCA at the rate relevant to that class without applying the half-year rule. 2. For eligible property that would not normally be subject to the half-year rule (or an equivalent rule), and that becomes available for use during the 2024-2027 phase-out period, generally the enhanced allowance will be equal to one-and-a-quarter times the normal first-year allowance.
The incentive will apply to property for which CCA is calculated on a: 1. declining-balance basis (including class 14.1, intangible property); and 2. straight-line depreciation (for example, leasehold improvement, patents, and limited period licences).
An enhanced deduction will also generally apply to eligible Canadian development expenses (CDE) or Canadian oil and gas property expenses (COGPE) incurred after November 20, 2018, and before 2028. These expenses are not subject to a half-year rule and, thus, will qualify for a first-year deduction equal to one-and-a-half times the deduction that would otherwise be available. The additional deduction begins to phase out for expenses incurred after 2023.
Rolling deadline
Eligibility:
Applicants:
1. must be businesses;
2. must have acquired properties after November 20, 2018, and must be available for use before 2028. A phase-out will begin for property that becomes available for use after 2023. 3. are able to claim additional allowances for properties at a liquefied natural gas facility only against their income that is attributable to the liquefaction of natural gas at that facility.
The incentive’s general rule will not apply to classes 43.1, 43.2, and 53, as they will benefit from the full expensing measures.
Applicants will not be able to claim the Accelerated Investment Incentive for the additional allowance for mining property in class 41.2.
Property acquired in non-arm’s length and roll-over transactions are not eligible for this incentive. They are considered non-eligible property (NEP).
Application Steps:
Applicants may claim the enhanced allowance in respect of an eligible property only in the first tax year that the property becomes available for use.
Documentation Needed:
No specific documentation has been identified.
Other Things to Note:
Capital cost allowance (CCA) rules are clearly set by the Canada Revenue Agency (CRA) and must be strictly followed. Capital cost allowance accounts for the cost of long-term assets that generate benefits for shareholders over a number of years. It establishes the amount that can be expensed each year for different types of assets.
There is an enhanced incentive for Oil&Gas, that’s why it’s tagged All, Oil&Gas.
Date modified: 2023-07-28
About the author
Maurice
